Blockchain became 2017’s technology mantra, following the previous years' mantras of big data, artificial intelligence, cloud, analytics and IOT. Every year it seems something bubbles to the top of the pile that promises to save our world and fix everyone's problems in one sweep. But where the cloud, IOT, big data and AI all promised a lot, to date, they have regularly fallen short on the delivery.
As an industry analyst, it’s my job to follow the trends and indeed attempt to predict the next big thing. For the past year, I have been researching and writing in depth on blockchain for business (B4B). Having spoken with dozens of blockchain evangelists and naysayers alike, what I know at this point is that blockchain won’t fix all of our problems, it's not "sexy," and it won't save the world. But it is, after all of the false hopes of the past decade, going to be a very big thing indeed.
Right now B4B may seem like a solution in search of a problem, and few understand what it actually does or what problem it solves. So rather than explaining the ins and outs of its distributed ledgers or the merits of public versus private blockchains, it’s probably more worthwhile to explain the paradigm that blockchain may break and reinvent — that of "trust."
Blockchain's Reinvents Trust for the Digital Age
One of the most fundamental concepts of B4B is in rethinking the way we trust one another. In simple terms, blockchain takes away the notion of having to trust an intermediary, be that a bank, a legal firm, or indeed, each another. Blockchain starts with the assumption we — institutions and individuals alike — are fundamentally untrustworthy.
It’s a fair call. It’s why traditional contracts are read multiple times in detail, signed and witnessed by multiple people, etc. Blockchain’s distributed architecture and combination of public and private keys transfers trust into the blockchain network itself. No single entity on the blockchain instills trust, it's only when a consensus of blind entities agree on the accuracy of a transaction that anything is trusted.
For the mathematicians out there, blockchain is a technical implementation of the famous "Two Generals" or "Byzantine Generals" problem.
In practical terms, B4B means any business transaction, particularly those with long chains of trust such as the movement and access of healthcare records or shipping manifests in the supply chain, can be radically reinvented to previously unimagined degrees of security, trust and efficiency.
'Smart' Contracts Automate Trust
Legal contracts lie at the heart of almost all business dealings and come in many forms. Blockchain for business still utilizes the concept of "contracts," but with a very different structure than the norm.
A traditional legal contract is in essence a binding agreement. Essentially, they define a product or service to be delivered, the obligations that are placed on each party to the contract, and often the price to be paid and under which conditions a payment should be made. A traditional legal contract typically comes in the form of a document that is agreed to and signed by all concerned parties. Or to put it another way, a contract is an agreed list of promises between two or more parties who in essence don’t trust one another.
So-called "smart" contracts in a blockchain perform the same function, but with an entirely different structure. Smart contracts assume from the get-go that not everyone can be trusted. A smart contract then is a set of computer-driven activities that enforce the performance and process of a contract without question. The actions that define who, how, when and what happens in the execution of contract clauses are all automated by the blockchain.
Blockchain therefore challenges the concept of trust via an intermediary and instead places trust into the actual mechanism of the network. It holds the potential to deliver a radically different and more efficient way of processing business transactions and their associated documents, and this is catching a lot of attention.
Information Managers, Take Note
Over the past couple of years alone, over 40 different industry consortiums have been formed by the world's largest and most important shipping, legal, healthcare, accounting and insurance firms (all heavily dependent on traditional document processes), along with IT firms ranging from IBM and Microsoft, as well as a slew of startups like Sphereon and A Star Labs, to map out the future use of blockchain in their respective industries.
Blockchain should be of interest, and at some point will be critical to, any information professional. These are the people that build and manage today’s traditional information trust systems. The consortiums mapping out their future plans need the expertise of these information professionals to guide and help them.
It is early days for blockchain. Those who get informed and involved now will be part of a "new wave" of document, records and information management. But the consortiums are not wasting time. Many have already started running technical proof of concepts (POCs) around the world. For example, just in the world of traditional information management we see:
- Blockchain being used to anchor a document — or a set of related documents — on a blockchain at the very moment the objects are moved to the records management system. This enables the organization to prove beyond any doubt when the objects where archived and that they are unchanged.
- Blockchain being used to anchor the audit trail of a process. This is being done on a transaction (step-by-step) basis: that in turn creates a chain of transactions on a blockchain. Immutable, independent, verifiable. Alternatively, the whole audit trail can be anchored as one log-file in one transaction on the blockchain. In both cases, the organization can prove the process was executed at a certain time, in a certain way and guaranteed as it was logged.A number of European and Middle Eastern municipalities are using blockchain to authenticate documents they send out to citizens and businesses: items like permits, statements, decisions, etc., that have an official status and are susceptible to fraud. Blockchain makes it cheap and easy to authenticate those documents and for others to easily verify them.
The POCs underway should alone be of interest and maybe even concern to the traditional world of information management professionals. We will see much larger, more ambitious and heavily funded POCs in 2018, with full industry rollouts starting in 2020. We project the market to grow from a modest $332 million today to $1.3 billion over the next five years. That’s a lot of money, but the real money will come into play through the business transactions in blockchain. Over time, these changes hold the potential to revolutionize everything from shipping goods across the world to instant verification and secure access to legal and health records to insurance claims.
Blockchain isn't the easiest thing to understand and is highly complex to develop and deploy, but the industry momentum is growing and huge investments are being made. So the time to learn and get involved is now, because the blockchain train is coming.
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